Facebook produced US$2.68 billion in ad revenue in Q2, up 67 percent year over year, and mobile ads accounted for about 62 percent of that haul, totaling $1.66 billion. I was quoted in E-Commerce times about this. Here is what I said, “The ability of Facebook to move into the mobile ad space and to monetize it successfully was heavily questioned last year. The company answered in the best possible way — by simply beating market expectations.” You can read the full article here.
Shifting from Cash Preservation to Investing
During this slow U.S. economic recovery companies tended to preserve cash rather than using it to hire or invest. However, last Thursday’s “flow of funds” report released by the Fed showed that the trend might be changing. The Fed revised (down nearly $500 billion) its estimates of how much cash companies are holding on their balance sheets. Before the revision, the Fed projected that corporate cash piles grew almost every quarter since the end of the recession. However, after the revision, corporations’ cash pile shrank: $1.74 trillion in Q1 2012 vs. $2.2 trillion in Q4 2011. Meanwhile, data from the BEA showed that corporate profits in Q1 2012 grew to $1.67 trillion annualized, compared to $1.5 trillion in the prior quarter. Corporate profits on a year-on-year basis grew 14.7 percent, compared to up 11.7 percent in the fourth quarter. This data is based on an analysis of Moran Zhang of the International Business Times.
According to a Salto Partners’ survey earlier this year, here are some key take-aways:
- During the recession companies have become very lean. Now, those lean organizations are the “new normal”.
- Companies are looking for growth. The catch is that CEO’s are very careful adding new headcount. Executives are rather investing in productivity enhancing tools and processes.
- Growth starts with success in Sales. Smart growth means to allow top performers to excel while finding ways to bring underperforming parts of the sales and business development organizations to the next level. Only if this occurs, does it make sense to ramp up other parts of their operation.
There is still a lot of uncertainty in the market. The European Crisis is still unresolved. We have a potentially slowing down Chinese Economy. Our national economy is moving slowly as well. Things will change gradually for the better. And that should be considered ‘good news’.
Bubble 2.0: Is it happening again?
Facebook bought Instagram for $1 billion. It paid that kind of money for a photo sharing app that can be used for free. Instagram has no revenue. For those of us who have been around the block for a while, deals like this are like déjà vu. We have seen this all before, way back in late 90s. The Internet was beginning to boom. New web-based businesses were supposed to defy gravity. Earnings didn’t matter. All of a sudden we talked about eyeballs and clickthrough rate as the measures of success, without even considering any financial data. The question is, are we seeing this exact same bubble – again?
Here are a few data points from the old bubble, for those of you who have forgotten:
Boo.com spent $188 million in half a year attempting to create a global online fashion store. They went bankrupt in May 2000.
Pets.com sold pet supplies to retail customers. Although sales rose dramatically, the company was weak on fundamentals and actually lost money on most of its sales. This was a fundamental flaw that the company couldn’t make up in volume.
During this first tech bubble several large companies had similar stories. There was WorldCom’s rise and fall: The company filed for bankruptcy in 2002 and former CEO Bernard Ebbers was convicted of fraud and conspiracy.
In the late 1990s it was enough for a company to have .com in the name, perhaps enriched by a leading “e” prefix. The market rewarded companies that were hardly more than a website with no revenue-producing business. Investors as lost money in the bubble because it turned out that many of these companies had no sustainable business model.
This time around, LinkedIn and Groupon are “real” companies. They have a business model. They have real revenues and profits.
Today’s start-ups are smaller and require less up-front funding because of cloud computing. In the late 1990s Venture Capitalists dominated the investment landscape and very often provided the fuel for some of the excesses. This time around Venture Capitalists come into a deal at a later point in time and have a lesser role.
Still, the similarities are striking enough to remain concerned. The social media hype leads to companies that try to “jump” on the social media bandwagon. If you throw a stone on a street corner it’s hard not to hit a social media expert. The job market in Silicon Valley is red-hot again. And certainly valuations have sky-rocketed. LinkedIn went public as one of the most expensive companies in America based on the ratio of its market value to its annual sales. Facebook is on a similar trajectory.
While today’s companies such as LinkedIn, Groupon, and Facebook are real companies, investors can still lose real money just like they did in the 90s tech bubble.
So, did Mark Zuckerberg do the right thing? Instagram has grown to over 40 million users. It went from 30 to 40 million users in only 10 days in early April of this year. It recently launched on the Android platform. Now it has access to another half a billion users. There is plenty of room to grow. Facebook saved itself time and headaches. It bought the competition while it was able to do so. Mark did what Mark had to do. The rest of us, including Facebook’s board, will watch what’s happening next.
Office Gadgets – Productivity Tools or Money Wasters
Everyday we see a new next thing. We are tempted to buy a new gadget. We download a new app. We see a new service to sign up for. So, my question is, what are new and cool next best things on the tech and gadget front? What’s a really great investment for your office/home office for general productivity?
Let me kick this off with a few things on my own:
- Computers crash. Laptops get lost. The must-have thing for professionals is a cloud based online back-up tool such as SugarSync. It backs up anything to the cloud the second you save a document on your computer. No more retyping of text you already had written. It gives you peace of mind while you are working, traveling or doing something else.
- Throw away your fax machine. Use myfax.com. You can send and receive faxes from anywhere – anytime. Plus, you can go completely digital even if others are not there yet.
- My iPhone is my office on the road. Keep it current. And don’t get rid of the unlimited data plan.
What say you?
Momentum in Business
Here is how it feels to have momentum. The phones are ringing. We don’t have time to read the morning newspaper because we have a tough time keeping up with the proposals we need to review and the contracts we need to read. Our delivery teams are busy. At the water cooler people talk about their premier airline status. We try to squeeze more functionality into the next release to make clients happy. We look at new hires, we even find more office space. The company is buzzing.
Here is how it feels if momentum is slipping. Customers are tough to get hold of. Deals are postponed. There are sudden departures from your own ranks. All and all, it’s quiet.
We all like to see the former, and we all dread the latter. The recession is over, but we are very far away from a booming economy. What are the lessons learned from the last few years operating in an economy that is trending sideways at best? How do you create momentum? What can we do to make our customers believe in our company and our solution? What can you do to make your own people believe they can make the “impossible” possible?
Here are my five lessons learned while operating successfully in a tough market environment.
1. Messaging – In any economy, our messages should be customer-focused, not product-focused. We need to know what the pain points are of our customers and how we can address them. Keep in mind that in a tough economy, customers’ needs and concerns change. We need to adjust our messaging accordingly
- Demonstrate value and return on investment. This can be done by pointing out that customers can do more with less, by simplifying a process or enhancing the value of our client’s offering. For example, if our product is exceptionally easy to use, we can demonstrate how the improved ease translates into savings.
- Decision-makers are increasingly wary about their jobs now. They need to understand how to enter a relationship with us safely.
2. Laser focus on target markets – If business gets tough the natural inclination is to chase every opportunity in order not to miss out. Someone drowning in the ocean flails frantically trying to keep his head above the water. I would recommend the opposite approach. Use coordinated strokes to keep your company’s head above the waterline.
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Have laser focus on the core companies and industries that can use your products or services. Make sure that you truly provide value and then pursue these markets relentlessly. Instead of simply increasing the “shots on goal” increase the quality of your company’s pipeline.
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In tough times, businesses will enter a relationship with our organization if we provide them with good reasons. (e.g strategic reasons, operational efficiencies, ROI).
3. Pricing – Take a look at your approach to pricing. This doesn’t mean you should enter deals at steep discounts, but here are some options to consider.
- Update pricing models. If we have been selling bundled products, consider un-bundling and offering products/solutions in smaller chunks. A number of smaller deals is better than no sale at all.
- Consider try-and-buy offers. Give customers a taste of the solution and, assuming the product or service is as irresistible as you know it is, you will only defer revenue briefly. This also helps to reduce the perceived risk of your customer betting her career on entering a relationship with your company.
4. Engage customers – Focus the marketing on “conversations” with customers. The days of one-way marketing are over. Customers want to talk with you on their terms, so narrow the gap. Make it personal. Be accessible.
- Nurture prospects until they are ready to do business.
- Encourage customers to be part of the conversation by building online communities that provide value to them while keeping you front-of-mind.
- Stay close to existing customers and maintain the relationships. Customer events such as user conferences are a great way to accomplish that.
5. Internal communication – Make sure that the people in the organization share your convictions. They get the news, too. Some will have doubts about the company’s future. Others are afraid of rising prices and a stagnant economy. As much as you are convinced of the viability of your strategy, your people need to be convinced as well. They need to believe that the goals for the company are achievable. And they need to see the path. Be authentic in the way you deliver your strategy within the organization.